Diamondback raised its 2026 output outlook by 4% as CEO Van't Hof flagged declining global inventories. A behind-the-meter power project could deliver first gas by late 2027.
Alpha Score of 57 reflects moderate overall profile with strong momentum, weak value, weak quality. Based on 3 of 4 signals – score is capped at 90 until remaining data ingests.
Diamondback Energy raised its 2026 production outlook by roughly 3% to 4% versus the original plan and sees a path to low-single-digit organic growth in 2027, Chief Executive Kaes Van't Hof said on the second-quarter earnings call. Production now sits about 4% above the start of the year, with five frac crews running consistently.
Van't Hof said the decision to boost guidance followed March's oil-price signals. The company is now weighing whether to hold third-quarter output at elevated levels or grow from that base. At current conditions, the model supports organic growth without sacrificing capital efficiency, he said.
"Our bet is that these global inventories, including SPRs, are going to need to be refilled," Van't Hof said, pointing to draws in oil and product stockpiles. Absent permanent demand destruction, the market will need additional supply to meet global demand and restock inventories, he added.
On the cost side, the company is seeing some inflation in consumables, particularly casing in the second half of 2026. Chief Engineer Al Barkmann estimated the impact at slightly more than 1% of total well costs, which Diamondback expects to offset through efficiency gains. A quarterly capital run rate of roughly $1 billion to slightly more than $1 billion could hold production flat, management said.
Completion efficiency has improved. Chief Operating Officer Danny Wesson said Diamondback averaged more than 21 hours of pumping per day during the first full quarter of continuous pumping. The company is targeting average completion performance of 5,000 feet per day across its crews; some pads have already surpassed that level. Electric frac fleets have helped contain fuel-cost inflation.
Diamondback reduced net debt by $1.6 billion in the second quarter. Van't Hof estimated that reduction represented $5.60 per share of value shifting from the debt side to equity. The company repurchased some shares in the second quarter and continued buying stock in the third quarter. Van't Hof said buybacks will be opportunistic rather than procyclical. Diamondback plans to build cash to address debt callable in 2026 and prepare for 2027 maturities, and potentially accumulate cash for maturities due between 2029 and 2032. Cash accumulation is not intended to fund large acquisitions, he said.
Power Project Timelines at Bryant Ranch
Chief Financial Officer Jere Thompson outlined a proposed power project at Diamondback's roughly 30,000-acre Bryant Ranch site near Midland, Texas. The company is working with an independent power producer to develop behind-the-meter reciprocating units as a bridge-to-grid solution. The site has distributed generation, remediated land, and dedicated natural gas and water access. The initial phase could deliver first gas as soon as the second half of 2027. Diamondback is also pursuing grid-connected power through ERCOT's Batch Zero process, with a potential 2028 timeline. The company was awaiting ERCOT's determination on project eligibility after an August 20 meeting.
Thompson said Diamondback has set aside 200 million to 250 million cubic feet per day of natural gas for the project. The in-basin feed-gas solution is the largest value driver, with additional possible benefits from Diamondback's 30% interest in water infrastructure company Deep Blue and potential land-related proceeds. Management said it would provide a broader update after signing definitive documentation with a hyperscale customer. Van't Hof stressed that Diamondback does not plan to become a power or data center operator – it intends to provide molecules, surface acreage, water and industry knowledge.
Barnett Expansion and EOR Tests
Diamondback continues to expand and consolidate its Barnett position, including through leasing activity with Double Eagle. The first four-well Spanish Trail pad has been drilled and is expected to be completed in coming months, with full-section results expected around year-end or early 2027. Van't Hof said Barnett drilling costs are approaching $400 per foot, with some wells already below that level. The company expects to achieve costs around $400 per foot or less consistently as it builds scale.
The company is testing surfactant-based enhanced oil recovery techniques. Barkmann said Diamondback completed a 12-well project during the quarter and was flowing back the wells, with initial results described as positive. Results have varied widely across earlier work. Some wells showed no uplift, while others produced three to four times more than before treatment. Van't Hof said the average earlier result involved wells producing roughly 150 to 200 barrels per day gaining an additional 100 to 150 barrels per day. The company is still determining which rock types and reservoir conditions respond best, and is incorporating the approach into new-well pads.
On natural gas, Van't Hof said improved pricing at Waha during July, following the start-up of new pipelines, provided near-term relief after weak second-quarter conditions. Diamondback views gas as an additive component of its oil-focused strategy and intends to secure more contracted transportation capacity to Gulf Coast markets, where demand could come from LNG exports, power generation and data centers. Gas production has exceeded expectations, which Wesson attributed to improved local gas marketing, maturing gathering and processing systems, additional redundancy and strategic split connections. Barkmann said a growing role for Barnett development could cause gas volumes to increase further over time.
Diamondback sees artificial intelligence and automation as early-stage tools for improving artificial lift optimization, reducing downtime and lowering operating costs. Lease operating expense fell below $6 per barrel during the quarter, primarily because of higher production volumes. Management expects costs to remain around that level or somewhat higher in the second half.
The company's FANG stock page on AlphaScala shows an Alpha Score of 57/100, a Moderate rating in the Energy sector. Crude oil profile market dynamics remain a key input to Diamondback's capital allocation.
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